Market Dynamics When Agents Anticipate Correlation Breakdown
Figure 13
The figure shows the dependency of the standard deviation of given returns from a “consensus” variable, which sums up the prevailing sign on a period of 6 days observed on the daily return series of the Datastream US Stock Index. We call prevailing sign that most frequently observed on a given number of returns. The cases of −3 and 3 verify when a period of 6 days reduces to 5 due to, for example, a market close. The case of 0 is that of no prevailing sign. (a) shows the weekly standard deviation of the daily returns of the Datastream US Stock Index. (b) shows the weekly standard deviation of the returns calculated on the daily price of the 25 yrs. Treasury bond issued on september 1986.
